The pound sterling (GBP) declined against the US dollar (USD) on Thursday, despite newly released data from the Office for National Statistics indicating a 0.1% growth in the UK economy during November. Sterling dipped 0.3% against the dollar in morning trading, approaching the $1.22 mark, its lowest point since November 2023. This drop followed a Wednesday surge fueled by cooler-than-anticipated inflation figures.
Currency traders are currently navigating a complex landscape, balancing the strength of the USD, bolstered by firm inflation data this week, against the uncertainties surrounding the upcoming inauguration of Donald Trump on January 20th.
Recent weeks have seen the pound under pressure as market participants assess the performance of Chancellor Rachel Reeves. Concerns over a potentially shaky start in delivering on the government’s growth promises have triggered volatility in bond markets, driving up borrowing costs and prompting a sell-off of the pound.
“A 0.1% growth figure hardly inspires enthusiasm, particularly when viewed within the broader context of an economy still struggling,” commented Danni Hewson, Head of Financial Analysis at AJ Bell. “While November saw a slight uptick as pubs and restaurants benefited from festive celebrations, a three-month perspective reveals stagnation.”
The pound also weakened against the euro, falling 0.3% to below the 1.19 mark.
Gold Prices Rise on Inauguration Eve
Gold prices experienced a modest increase on Thursday as markets anticipated the inauguration of President-elect Donald Trump. Spot gold rose 0.3% to $2,705 per ounce, with futures contracts climbing 0.6% to $2,733 per ounce.
The prospect of tariffs and a potential trade war initiated by the US has contributed to short-term price gains for the precious metal.
“Looking ahead, Trump’s policies could lead to further surges in gold prices,” stated Rick Kanda, Managing Director of The Gold Bullion Company. “Trump’s presidency is characterized by unpredictability and heightened geopolitical risk, factors that often drive investors towards gold. The ongoing conflicts in Ukraine and the Middle East, and his response to them, will likely be crucial for global markets, including gold.”
Kanda further added, “Predictions suggest gold reaching $3,000 per troy ounce by the end of 2025. Given its recent performance, I believe this is entirely plausible. Sustained gold acquisition by global central banks will be a key driver in achieving this milestone.”
Oil Prices Dip Amidst Gaza-Israel Ceasefire Hopes
Oil prices retreated slightly on Thursday morning as hopes for a ceasefire agreement between Gaza and Israel remained strong. While a ceasefire and hostage deal is anticipated to take effect on Sunday with an initial six-week truce, fighting persists. Reports indicate at least 20 Palestinian casualties since the commencement of negotiations.
Brent crude futures declined 0.3% to $81.79 per barrel, with West Texas Intermediate prices similarly dropping 0.3% to $79.80.
Market observers are also closely monitoring data on crude oil inventories. Recent reports revealed a decline in US crude oil stocks last week to their lowest levels since April 2022, attributed to rising exports and falling imports.
Sanctions imposed by the US on Russian oil producers and tankers have forced Moscow’s major traders to seek alternative sources, contributing to increased shipping costs.
In conclusion, while the UK economy showed marginal growth in November, the pound struggled against both the dollar and the euro. Meanwhile, gold benefited from pre-inauguration uncertainty, and oil prices eased on ceasefire hopes in the Middle East. These market movements highlight the complex interplay of economic and geopolitical factors influencing global financial markets.
